Published: 18 March 2026,09:04
Daily Market Analysis New
*Eurozone CPI is expected at 1.9% YoY, with core and services inflation firming—keeping pressure on the European Central Bank to stay cautious.
*Rates are expected to remain unchanged, but any hawkish shift from the European Central Bank could support the euro.
*Oil volatility linked to tensions around the Strait of Hormuz may push inflation higher, reinforcing EUR resilience.
Market Summary:
The Eurozone final Harmonised Index of Consumer Prices for February 2026, due for release today, is expected to confirm the flash estimate of 1.9% year-on-year, marking a notable acceleration from January’s 1.7% reading. This uptick represents the first meaningful increase in headline inflation in recent months, driven by persistent services inflation rising to 3.4% from 3.2% and core inflation climbing to 2.4% from 2.2%, while energy price declines moderated to -3.2% .
The release carries heightened significance as it arrives on the first day of the ECB Governing Council meeting (March 18-19), with the policy decision and updated staff projections scheduled for tomorrow. Crucially, the February data was collected before the latest Middle East escalation began disrupting energy markets, meaning the inflation picture may already be more challenging than today’s print suggests. ECB Chief Economist Philip Lane has warned that a prolonged conflict could push inflation higher while weighing on growth, with the outcome dependent on the conflict’s scope and duration.
Markets anticipate no change to key rates, with the deposit facility rate expected to remain at 2.00%. A Reuters poll shows over 90% of economists expect the deposit rate to remain unchanged through end-2026, reflecting confidence that current settings support price stability. However, the February inflation print, combined with rising geopolitical risks—particularly oil price volatility tied to Middle East developments—has prompted modest upward revisions to 2026 inflation forecasts, now averaging around 2.0%.
Near-term euro dynamics appear supportive. A firmer ECB narrative acknowledging upside inflation risks would reinforce EUR resilience, potentially driving EUR/USD higher amid reduced easing bets. Interest rate futures have already priced in a higher probability of tightening later in the year, shifting away from earlier rate-cut expectations. EUR/USD currently trades around 1.1416, having adopted a more defensive short-term structure due to energy market uncertainties, though the pair remains above long-term support zones .
Growth projections remain modest, limiting aggressive upside, but sticky core inflation and external shocks provide a constructive backdrop for the single currency in the coming weeks. Investors will focus on services and core details today, alongside tomorrow’s ECB communications and updated staff projections, for clearer directional signals on both inflation trajectory and policy response.
Technical Analysis
The EURGBP pair continues to trade within its established long-term downtrend trajectory initiated last November. Following a brief technical rebound that provided only temporary relief, the pair has extended its losses and is currently hovering near its recent low level around the 0.8625 mark. A decisive break below the current range-bound consolidation would constitute a strong selling signal, likely accelerating downside momentum toward the next support objective near 0.8600.
However, traders should exercise caution as momentum indicators have rebounded in the near term, suggesting that the dominant bearish momentum is temporarily easing. This divergence between price action and momentum oscillators raises the prospect of a short-term technical rebound before the next leg lower. The 0.8645-0.8650 zone represents immediate resistance, with a break above this level potentially triggering a corrective bounce toward 0.8670-0.8690.
Critical support remains at the 0.8613 current-year low established on February 4. A sustained break below this level would confirm the bearish continuation and open a path toward the 0.8600 psychological level and potentially lower. For now, the broader downtrend remains intact, but the improving momentum signals warrant caution against aggressive short positioning without confirmation of a range breakdown.
Resistance Levels: 0.8670, 0.8725
Support Levels: 0.8610, 0.8560
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